Costs litigation in the modern age of cryptocurrency - can an unknown defendant make costs submissions in detailed assessment proceedings?
This article was originally published on the Thompson Reuters Practical Law Dispute Resolution Blog, March 2023.
In this digital age, where the internet allows for anonymity and cryptocurrency is obtaining ever increasing legitimacy, it is interesting to consider how these societal shifts will impact civil litigation and specifically, the costs implications for parties arising out of litigation.
In the last year we have seen various cases in relation to cryptocurrency, for example Tulip Trading Limited v Bitcoin Association for SV (BSV) and others ; an application in relation to whether Bitcoin could be used as security for costs (the answer being no – it is too volatile).
In the case of Wright v The person or persons unknown responsible for the operation and publication of the website www.bitcoin.org (including the person or persons using the pseudonym 'Cøbra' , the Senior Courts Costs Office (SCCO) was asked to consider whether a paying party could reasonably make costs submissions at detailed assessment when their identity was unknown.
Background to the substantive action
The case related to a claim for copyright infringement regarding literary work published by the defendant’s website ‘bitcoin.org’. Throughout the action the defendant refused to confirm their name or postal address to the claimant, communicating only via email and operating under the pseudonym Cøbra.
The claimant, Mr Craig Wright obtained a default judgment against the defendant in respect of the copyright infringement and it followed that the defendant was to pay the claimant’s costs.
The issue of costs
The claimant prepared a bill of costs totalling approximately £570,000 and formal costs proceedings were started. Following the parties’ failure to agree costs, the case was listed for a two day detailed assessment hearing at the SCCO.
At the start of the assessment the claimant argued that Cøbra should not be allowed to partake given that they had refused to state their identity and had not provided a name and address to the court. The claimant argued that this approach went against the principles of “open justice" and “fair and just proceedings”.
At the costs hearing the court considered this issue in the context of the substantive action having been conducted and concluded without this argument being previously raised. Costs Judge Rowley stated: “The defendant’s apparent decision to be involved in the detailed assessment of the claimant’s costs, but not in the substantive proceedings, leads to an odd procedural position” and “It is rare in the extreme that a party will only get involved in relation to the costs of the proceedings.”
Consideration was also given to the fact that the parties had been engaging in costs proceedings up until the point of assessment, including exchanging points of dispute and replies prior to the issue of the defendant’s identity being raised.
Interestingly, Costs Judge Rowley accepted that Civil Procedure Rules (CPR) Part 47 does not specifically require the defendant’s name and address to be stated in order for the points of dispute to be compliant. However he found that although the CPR does not make formal reference to provision of identifying details for the defendant party, the rules as a whole clearly expected a party to identify themselves at the outset of proceedings.
The Judge stated: “I do not think… that the absence in Part 47 of any requirement to provide the name and address for service is any pointer when considering the expectation of the rules regarding identification. In my view, it is plain that a party is expected to identify themselves when first actively involved in the proceedings. That requirement is clear from the rules concerning the commencement of a claim and the filing of a response to that claim.” He held that until identification of the defendant had occurred they could not be said to have submitted to the jurisdiction of the court.
Although this situation was without precedent, Costs Judge Rowley ultimately sided with the claimant affirming: “ I have come to the conclusion that if the defendant wishes to challenge the claimant's bill of costs, then they will have to identify themselves in the manner indicated in the application notice. Until that has occurred, the court cannot take notice of the points of dispute that have been served. The procedural position is the same as if no points of dispute have been served at all and the claimant would be entitled to seek a default costs certificate.”
The conclusion here appears definitive; although it may be becoming a standard practice to operate anonymously in internet transactions, the same cannot be said for legal proceedings in the courts of England and Wales.
This is a particularly unique case in that the claim had managed to make it all the way to a costs assessment before the issue of the defendant’s identity coming into play. However the SCCO’s position was clear; in the absence of identification a party cannot make costs submissions and costs will be awarded in default.
Although exceptional in its facts, this case is unlikely to be the last to deal with costs points arising out of this emerging area of law in relation to digital currency assets and blockchains.
Pending any appeal, with the legal costs community and the courts seemingly still struggling with the common issues arising from the move to electronic bills of costs and digital detailed assessment, it will be interesting to monitor the continuing impact on costs litigation of these novel problems caused by the ubiquity of the digital transformation.